Will Uranium Prices Ever Recover?

Uranium (Nuclear Minerals) / Nuclear Power - Economics, Design, & Industry

Date posted: 04/23/16

Ryan Vanzo reports have anticipated an eventual rise in uranium prices. Since 2013, Cameco Corporation management team has touted the belief that the long-term outlook for the uranium industry is very strong, despite current market uncertainty. Uranium prices remain perpetually weak, however, continuing a slow drift downward that started in 2008. Will miners such as Cameco ever get to benefit from a rebound in uranium prices? J.P. Morgan estimates that uranium prices will more than double by 2020, based on classic supply and-demand dynamics. By 2035, the world energy demand is expected to grow by nearly 50%. Much of that demand will be met by building nuclear reactors. For example, according to Barron, China annual uranium needs will roughly double by 2020, outpacing the rest of the world combined growth. By 2025, Cameco expects to see around 113 new reactors built, more than 60 of which are under construction right now. Demand should also be buoyed through capacity additions at existing plants. In all, 80 gigawatts of nuclear power may be added to the world grids over the next decade, with continued growth expected beyond 2025. While demand is expected to steadily grow, supply may have a tough time keeping up. Uranium mines can take up to a decade to reach full production, and with weak prices, the industry has been plagued with cancelled or delayed projects. Already, new supply is being outpaced by demand. According to Cameco, about 10% of total supply required over the next decade will need to come from new mines that are not yet in development. Long lead times and prohibitive costs should lead to tightening supply (and higher prices) if the industry demand assumptions prove correct. Two temporary phenomena are happening in the uranium market to explain why current prices are low and what will drive future prices, i.e., the Fukushima incident and non-OECD growth.